Looking to rent out house - tax query

Ivor_Guddon

Looking to possibly rent out my house on the hap scheme , for ref its a 3 bedroom mid-terrace with attic conversion to 4th bedroom in north dublin

but looking for some info if possible on the tax liability to see if its a viable option

quick story

Single unmarried man with 2 kids ( not sure this matters ) earning in the higher tax bracket

If let's say i want to come out with €2000 per month ( that's mortgage and small profit ) what would i be letting it out to cover tax and all related costs ?

Am i right in saying i only pay tax on the profit after the mortgage charge ie say rent for 2500 per month and mortgage is 2000 so thats 500 profit and pay 40 % tax on the 500 so i owe €200 per month tax on that ?

Peregrinus

You can only get a deduction for the interest component of your mortgage payment. That varies over the life of the mortgage but your bank can advise you what it is.

So, if you pay 2,000/month to the bank, lets say 1,700 of that is interest and 300 is repayment of principal. You can deduct the 1,700 from your rental income: 2,500 - 1,700 = 800. Tax on that at 40% will be 320.

You may have other expenses for which you can claim a deduction — e.g. the cost of insuring the house, anything you spend on maintenance or repairs. But of course these are expnses that you actually incur, so they reduce your income from letting the property as well as your tax on that income.

Ivor_Guddon

for ref in Dec 2023 and March 2024 i paid €2773 Interest so assuming its 4 times a year that's €11092 interest per year

celtic_oz

Look at the examples on this page .. mortgage interest relief is lower than you think.

https://www.revenue.ie/en/property/mortgage-interest-relief/thresholds-and-rates.aspx

All other rent is taxed as if it's additional income .. (~50% tax for anyone who reaches the higher rate in their employment salary)

Kaisr Sose

https://www.boards.ie/discussion/comment/122088723#Comment_122088723

Are you not paying interest every month?

Re setting rent. You are limited to what other similar properties are rented for in the area. You need to research those.

At the outset you would be advised to set it at that level, and not below it. Once you set the rent, you are limited by legislation on future increases.

Finally, think long and hard about whether you want to be a landlord. Would selling be an option?

wildwillow

Hap probably won't consider the attic bedroom as habitable as a bed space unless it complies with planning, fire regulations etc. They will also inspect the house. Rent is paid a month in arrears.

You need to factor in periods when there will be no rent, either because the property is not let or the tenants aren't paying. Budget also for repairs and replacements. Insurance will be higher. You need to inform your lender and the rate will probably change.

Look at the worst possible outcome and see if you can survive. Tenant not paying, court process to get an eviction which can take years, and a destroyed property at the end of all this.

It may be easier to rent to single people rather than a family. Tenants have rights after 6 months. In your case you will have to be either selling the house, or using it for yourself or a family member, to regain the house, unless there is a valid reason for eviction.

You will be paying income tax at your top rate and USC needs to be factored in too.

Be prepared for complaints about noise etc. from adjoining houses.

burtner

I would keep the top room for private use by you or family member and then let out the 3 bedrooms on a licensee agreement rather than lease, you will get more money and retain control of your house.

Ivor_Guddon

https://www.boards.ie/discussion/comment/122089731#Comment_122089731

sort of like rent a room scheme but more than 1 room ?

i won't be living in the house at all , but if there is a loophole to pay as little tax i'll look at it

wildwillow

You have to be living there as your PPR to avail of the let a room scheme. Questionable as to whether the renters are licensees if you retain a room for your own use. Wouldn't like to depend on this.

dennyk

https://www.boards.ie/discussion/comment/122091145#Comment_122091145

If you or said family member aren't actually occupying the property as their primary residence, the RTB will most likely deem the actual occupants tenants, not licensees. They're wise to the ways of shady landlords trying to evade tenancy law by claiming to live in a property when they actually don't.

Del2005

https://www.boards.ie/discussion/comment/122089678#Comment_122089678

Hap probably won't consider the attic bedroom as habitable as a bed space unless it complies with planning, fire regulations etc.

Or worse on inspection they'll require the OP to make the house meet the requirements of a 3 storey house even if it was rented as a 2 storey house, especially if the tenants are using the attic as a bedroom.

TheChizler

https://www.boards.ie/discussion/2058349971/looking-to-rent-out-house-tax-query

If rent covers your mortgage interest you're already in profit on that front barring rental expenses, if it covers capital repayments too you're doing incredibly well. Bear that in mind when doing your sums.

Ivor_Guddon

https://www.boards.ie/discussion/comment/122092503#Comment_122092503

I'm a single guy paying 40 % tax as is in my job

my mortgage is €1450 P/M

if i want to make €500 per month profit , what should i be asking for rent wise ?

i get charged interest every 3 months approx €2773 so about €11k a year

TheChizler

I'm sure someone will correct me but strictly speaking about €1411 plus expenses, and you're then taxed on your income/profit. Sounds like you might want an after tax profit so for that €1758 plus expenses.

That's not accounting for things you might or might not be able to deduct like insurance and property taxes, no idea if they count as expenses or not

Ivor_Guddon

https://www.boards.ie/discussion/comment/122092651#Comment_122092651

mortgage is €1450 p/m and €11,000 a year interest charged so divide that by 12 is €916 a month interest

so €534 a month is off the equity

TheChizler

I used your more specific €2773/3m figure but yeah same principle